Making Security Pay

March 1, 2010

Well-managed security does more than just provide security – it cuts and prevents costs, and can produce an ROI

Facilities professionals often argue about the concept of return on investment (ROI). Some say that security is an expense, not an investment; therefore, CEOs and other C-level executives shouldn’t expect an ROI from security. The role of security, says this contingent, is to identify the risks faced by a company – perhaps a company that owns and manages a portfolio of office buildings – and to manage those risks. Security is not a profit maker, they say. Security can’t make a dollar amount drop to the bottom line, so don’t bother trying.

Those on the other side of the argument insist that the opposite holds true. Security is a business function, they say, just like marketing and manufacturing. What a company invests in business functions must produce a return, or the company won’t be in business very long.

Both groups are correct. Marketing and manufacturing sometimes require spending that doesn’t produce a return, and the same holds true for security. Security costs sometimes produce, and sometimes don’t produce, returns on investment. Both kinds of spending are worthwhile.

As a pure cost, security can reduce lawsuits. By paying for reasonable measures designed to prevent personal injury, security spending can hold down the amount of a judgment.

How Does Security Spending Produce ROI?
Security spending might go to investments that will produce an ROI. Suppose a building owner retains a security firm to provide security officers for a portfolio of buildings. The instant that security officers show up, good things happen. “General liability exposure is reduced for owners,” says Joe Marcello, executive vice president of national operations with Bannockburn, IL-based IPC International Corp.

As such, company profits might pick up in the form of lower insurance rates. Give security its due for producing an ROI.

In addition, with extra guards patrolling the building, maintenance costs may fall. Patrolling security officers can lower the lights and make sure the HVAC is turned down after hours. When performed by a security officer, those duties might reduce staffing needs for maintenance.

These are returns that a security investment may produce. But ROI is only one financial benefit that flows from a security investment.

A patrolling security officer might notice a stuffy area where the air conditioning is laboring to perform. Reporting this problem early enables maintenance to repair it before it runs up utility costs or breaks down and requires a major investment.

“You can also add security technology to reduce staffing needs,” says Marcello. “By adding more cameras, you can eliminate some security patrols. When this is done right, tenants won’t feel any impact on how safe they feel.”

That is a classic ROI tactic for an existing security department or manufacturing department: use automation to reduce annually recurring labor costs, and then push the labor savings to the bottom line.

In some cases, property managers have worked out arrangements in which a security services firm also provides concierge services for tenants. “In many Class-A office buildings, we provide concierge-style services,” says Russell C. Collett, COO with IPC International.

According to Collett, security personnel can hand out applications to people who enter the building in search of employment.

A security firm might also fill in for tenants’ regular administrative staff and pick up laundry, make reservations for dinner, walk tenants to their vehicles after dark, and perform other tasks. Such services can enhance the value of the building to tenants, making them willing to pay more in rent.

Of course, some security spending just buys security and sends nothing to the bottom line. But security spending that doesn’t produce an ROI may generate new revenue because employees and prospective employees feel safer about going to work, and they work more productively.

Use Your Imagination
It’s more difficult to squeeze ROI and new revenue out of building security than other kinds of security.

For instance, a security director can deliver an ROI to a manufacturing concern by running down bad actors who are counterfeiting the company’s products. A retailer’s security department can produce an ROI by reducing employee and customer theft. A pharmaceutical company’s security department can protect its corporate ROI by protecting intellectual property. A law firm can protect its clients’ confidentiality and attract new clients.

For businesses that manufacture products, sell products, or provide services, the potential for producing an ROI with security spending is often obvious. Building owners have to use a little more imagination. Still, the potential for earning an ROI from security spending is there

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